Sterling is strong and riding high against the dollar and euro. This might not
last for long against the U.S. dollar, with a potential rise for the
greenback on the horizon.

With sterling nearing a three year high against the US dollar and a one year high against the euro in the past week, it's fair to say that things are looking up for the pound. David Kerns, head of private client dealing at Moneycorp, the exchange experts who provide of the Telegraph International Money Transfer Service explains why:

"Sterling has had a buoyant start to 2014 as recent UK economic data releases have painted a picture of improving economic conditions. Both the UK’s own Office for Budget Responsibility (OBR) and the International Monetary Fund (IMF) have recently revised their forecasts for UK growth to climb further this year and the next, helping to drive both consumer and business investment confidence ever higher. Also, now that inflation has dipped to the Bank of England’s (BoE) target level of 2%, Governor Mark Carney has found himself with slightly more wriggle room to help dampen any near-term base-rate hike expectations."

The pound's lead might not last long however, as Kerns says that with monetary policy changing across the Atlantic the dollar might be set for a surge. "From America we have already seen the US Federal Reserve start to scale back their monthly stimulus policy with the injection of $85 billion into the economy reduced to $65 billion in February. As the United States prepares to further cut the amount of quantitative easing measures, and eventually move away from emergency measures altogether, the US dollar could strengthen from current levels."

Though, it's a different story from the continent as the single currency might slip further, Kerns explains:

"The euro continues to underperform against the British pound as the picture of economic health across the channel is very mixed. European unemployment remains at record highs with economic growth projections improving although the overall recovery remains far too shallow and very much uneven. The European Central Banks President Mario Draghi remains poised to adjust the Eurozone interest rate downwards again and to deliver whatever accommodative policy measures deemed appropriate give the 18 nations in the currency union every chance of a sustainable recovery. The Bank of England and European Central Bank’s diverging monetary policies are clearly favouring the pound over the single currency."

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